A Surprising Clue About Oil Prices Today

Analysts predict another improvement in inventory last week, which may further negate the effect of OPEC-output cut to end global oversupply.

Compliance by Russian Federation still remains weak. OPEC has achieved 86 percent compliance rate on the proposed cuts in January 2017.

Saudi Arabia and Angola was reported to have cut production by half helping offset weaker compliance by other members that agreed to limit their output. On the opposite side, however, is OPEC's compliance with its cuts, which improved to 94% in February from 82% in January, according to a Reuters report. Russia, while down by over 100,000 bpd, will probably not fully implement its promised reduction of 300,000 bpd.

However, some data other than the production numbers suggest that the Kingdom might be bypassing the OPEC deal by other means. An extension of the cuts would certainly help shrink the glut, but the longer the deal wears on, the more likely will be the risk for fabricated statistics. Nigeria and Libya are not subject to any sort of production cap, given that they are recovering from internal unrest that had weighed on production.

The outlook for the oil complex remains murky, with a wide array of views on a number of key factors for prices, including the lasting impact of the output cuts associated with the November 30 OPEC/non-OPEC agreement and the direction of USA oil production. Shipments from the southern Iraqi port of Basra grew by 10 percent, while sales by the Kurdish Regional Government in the north of the country were up 13 percent.

Iran's output increased to 3.83 million barrels a day, slightly above its goal of 3.797 million barrels a day.

Most exploration and production companies report shale break-even prices below $50 per barrel and will continue to add rigs provided prices remain between $50 and $60 per barrel.

The doubling in oil prices over the past year, aided by OPEC's output deal, has revived USA drilling and production. A sustained rise in USA crude stocks reported earlier in the week by the Energy Information Administration and the American Petroleum Institute, though largely factored into crude prices, lingered as a bearish backdrop. Meantime, oil exports surged to a record. As a result domestic production rose to 9 million barrels a day last week.

A decline in USA gasoline futures on Tuesday also pressured broader oil markets.

Prior to the landmark deal, the volume of production in the country was at the level of 37.72 million tons of oil, while daily output was at 829,100 barrels. "Nationwide crude oil stocks are at their highest". The active futures were higher in price than the expiring futures contracts in the fund. A strike by oil workers in Gabon - the tiniest member - contributed to a decline of 15,000 barrels a day.